By Nilotpal Shyam
With the advancement in technology the meaning and ambit of property widen up and hence the creation of human being involving the skill and labour was started being protected. The Intellectual Property regime and litigation is prominent in various countries of the world due to this very reason. United States is said to be the country having the most number of cases relating to patent and the number of cases is on rise in other countries of the world. Recently Germany took a new step in this field by introducing a unique procedure for dealing with the assertion of standard essential patents. This procedure was named by the Federal Supreme Court of Germany in 2009 as the ‘Orange Book’ defense or procedure which in its literal sense means a good faith defense.
According to the recent decision, Orange-Book-Standard, the compulsory licensing objection was taken into consideration and it was said that compulsory licensing could also be applied against an application for an injunction in the case if the defendant had behaved like a ‘real licensee’. The countermeasures for any claim of patent infringement have always been dealt either on the ground that the allegation of infringement is wrong or the patent is invalid or unenforceable. This new procedure called as ‘Orange Book’ states that infringement in case where the Patentee is acting in contravention of Competition law, the infringer has a valid defence for doing the same. This has been consistently been followed in some other cases by courts of different jurisdiction at varying degree.
Orange book — a new step in IPR
According to the recent decision, Orange-Book-Standard, the compulsory licensing objection was taken into consideration and it was said that compulsory licensing could also be applied against an application for an injunction in the case if the defendant had behaved like a ‘real licensee’. But, at the same time Courts like Hague Court has refused to accept this as a valid precedent. In these circumstances the article tries to explore this emerging paradigm in the field of Patent violation. The application of Intellectual Property Right in the realm of Competition dispute has arisen as one of the most complicated disputes in the field of Competition law. The conflict does not limit to the jurisdiction but it also goes on to possible clash between two different laws. In India, these types of litigation are in their infant stage. But, it is on upward terrain especially in EU and US.
The recent decision of German Federal Supreme Court famously known as ‘Orange Book standard ruling’ has set the ball further moving with greater spin. The Court in this case not only accepted the relative interface between the IPR and Competition Law but, also held that abuse of dominant position can be pleaded as a valid defence against the injunction sought by plaintiff for the alleged infringement.
According to the Court’s ruling, this defence is subjected to the fulfilment of two conditions. Firstly, the defendant must unconditionally offer to enter into an agreement for obtaining the licence of the patented product at fair, reasonable as well as non-discriminatory terms. Secondly, the defendant must pay the royalty into an escrow account behaving as if it is an actual licensee. The main purpose of this procedure is to provide injunctive relief to the party. Injunctive relief basically means that it is a kind of discretionary power of the court in which, upon deciding the plaintiff’s rights are being violated, the court tries to balance the injuries.
This kind of judgement of introducing the concept of injunctive relief in patent cases is having the capability to strongly attack the core of intellectual property rights of industries. The importance of licensing all essential patents in advance is one of the key factors for this judgment. The example of the ICT industries can be taken into consideration where almost everything including their technology is covered under essential patents.
Thus, producers which are manufacturers of standard compliant products will be exposed to the risk of patent infringement the most and they must license all essential patents in advance. A standard compliant manufacturing is impossible without infringing such patents; therefore adjustment is made in the royalties for licensing so that the scope of losing their potential license is decreased.
Various legal systems of the world differed from this idea of new creation of ‘Orange Book’ defence due to various reasons. If the condition of Dutch Court is taken into consideration then they clearly declared that it is not accepted in their sphere due to several reasons, i.e. it is contravening patent law, it creates legal uncertainty, and it is unnecessary to protect the defendant’s interests. Such a ruling cannot be said to be justified as a whole, the reason being that it tries to protect one side’s interest of the plaintiff without giving much consideration to defendant side.
It is said by the Dutch Court to be contravening to patent law as they said that the act of defendant to call for FRAND licence cannot be a justification for continuation of patent infringement. At the same time the Court drew a parallel with the Dutch system of compulsory licences, under which a claimant for a compulsory licence has no (licence) rights before either a licence agreement has been concluded or the court rules in favour of said claimant. It is said to be uncertain due to the reason that in order to prevent a patentee from enforcing its patent rights because of a fair, reasonable, and non-discriminatory licence claim would create legal uncertainty.
Orange Book defence has a number of negative effects. It tries to unbalance the benefit of patent holders, setting an incredibly high bar for an antitrust violation. This judgment was also supported by various other countries of the world on the ground of uncertainty of this Orange Book defence. This ruling of the Dutch Court was important as they clarified that patentee for a FRAND licence and parties who don’t agree on FRAND terms will be asked for a ruling, whereby the court may issue a (temporary) licence until the outcome of such proceedings.
It is noteworthy that this decision may provide defendants that are sued in the German courts with an additional defence, now that it seems as if a temporary licence may be obtained via the Dutch court. This raises a serious question of the main purpose of introducing such concept if there is other way out to escape the provision. This also raises the question on how far such procedures are able to achieve the purpose for which they were created.
Therefore, the conclusion that can be drawn is that such laws are basically party biased procedure should not have been adopted by the Federal Court of Germany because this ultimately lead to increase in litigation without fulfilling the needs of anyone. In this era of advancement of technology and mind it is very necessary to find out methods which will act as a middle path for serving the need of individual in balanced sense rather than acting as arbitrary and one sided.